The Shrinking Singapore Broking industry

What is ailing the Singapore broking industry? My comments alongside the Bloomberg article in blue.

Singapore’s shrinking brokerage industry is set to get even smaller as trading restrictions planned by regulators dent profits, according to a body that represents individual brokers.

The average daily value of shares tradedin the city, which slumped 40 percent in the first two months of 2014 from a year earlier, will decline further should rules be implemented that include requiring collateral for some trades and shortening the settlement period, said the Society of Remisiers, which represents dealers who work entirely on commission. Singapore Exchange Ltd. and the Monetary Authority of Singapore proposed the changes after a penny-stock rout in October erased $6.9 billion in market value of three companies over three days.

“More people will leave the industry as they’ll get less business,” Jimmy Ho, president of the Society of Remisiers, said by phone. “Once they cut the settlement period, there will be less speculative trading and it will drag overall volumes.”

The number of stockbrokers in Singapore fell 8.4 percent percent to 3,973 at the end of last year from 4,336 in 2011, according to data from the bourse, as the industry was buffeted by declining trading volumes and commissions as well as competition from online trading platforms. The city’s benchmark Straits Times Index trailed all its major developed-market peers in the past 12 months and slid 1.2 percent this year through yesterday.

Even after Singapore Exchange teamed with Singapore Management University and CIMB Group Holdings Bhd. (CIMB) in April 2012 to provide training programs for the industry, traders’ ranks continued to thin. This year, the bourse partnered with the National Trade Union Congress’s Employment & Employability Institute to bolster interest in the profession.

Comment: SGX made the first boo-boo which killed market velocity, that is making the trading in penny stocks into decimal places. In Malaysia it is still minimum 0.005 sen per bid. Obviously when you staff SGX with more MBAs and legal heads, you are not going to get rules that promote trading. They went by the textbook rule in that the smaller the bids, the bigger the volume. Here is where textbook fails to understand market participants' psychology. In Singapore, there are too many penny stocks, and I mean really pennies ... those under 20 cents. When the bid and offer looks like this 0.033-0.034 it does not make for more attractive trading compared to Malaysia's 0.030-0.035 ... the psychology is that in a single bid traders and punters are already making money and able to cover comm, that makes it "attractive" to big punters or syndicates to move a stock a few bids. In Singapore, you would see huge volumes at every bid and offer thus making it arduous to move stocks. Penny stocks are by nature speculative and you have to make it more conducive for them not make it harder for them to make (and lose) money. Though your propensity to lose money would also shrink in Singapore penny stocks, that is not the aim of punters (minimise losses), its to make the big gains.

Industry Adjustment

“Brokerages are able to cope with fewer dealers because trading volumes are lower,” Society of Remisiers’ Ho said. “That’s a natural adjustment for the industry.”

It will be hard to draw young people, given the high risk and low commissions, said Yeo Aiqi, 28, who left Phillip Securities Pte, the city’s biggest brokerage by clients, in 2011 after working three years there.

“Stockbroking appears to be a sunset industry,” Yeo, who now sells women’s apparel at her online store www.clothingcandy.com, said by e-mail. “Trading volumes are low and commission rates are falling.”

The average value of shares traded on the Singapore bourse tumbled 40 percent to about S$1.06 billion ($836 million) in the first two months of 2014 from S$1.77 billion a year earlier, according to data compiled by Bloomberg. Transactions in Hong Kong fell 11 percent in the same period, while those on Japan’s Topix index increased 17 percent.

Stock Rout

Blumont Group Ltd. (BLUM), Asiasons Capital Ltd. and LionGold Corp. tumbled at least 87 percent over three days in October, prompting the city-state’s central bank and bourse to review its equity market structure. The companies said they didn’t know what precipitated the plunges, which spurred at least a dozen lawsuits from banks and brokers seeking to recover losses on collateral held against margin loans.

SGX introduced circuit breakers last month to minimize volatility in share prices and is seeking feedback from the industry before it implements the collateral and settlement period changes.

While the move is meant to revive investor confidence, it won’t improve the outlook for brokers, said Gabriel Yap, who left the industry in 2009 after 19 years as a trader.

“The casualties of the penny-stock saga are the stockbrokers,” Yap, who now manages his own investment advisory firm, said by phone. “If the clients don’t pay, the dealers or the remisiers will have to cover.”

Shrinking Commissions

To make the profession more appealing, SGX needs to address dwindling volumes to counter the decline in brokerage commission rates, which have fallen to 0.1 percent of the value of shares traded from 1 percent 10 years ago, according to Yap.

“Brokers have nothing exciting to recommend to their clients these days,” Yap said. “Trading was buoyant before I left the industry due to the influx of Chinese listings and now investors are avoiding such companies after a number of them got embroiled in accounting or stock manipulation scandals. SGX promoted the listing of real estate investment trusts in the past decade but interest in them is starting to wane.”

At least 28 Chinese firms on the exchange have been suspended or delisted since 2008. There were 144 China-based firms listed in Singapore at the end of February, according to the exchange. The FTSE Straits Times China Index of 31 mainland stocks sank 7.3 percent in the past 12 months.

Comment: Lack of cowboy-ness in SGX. When you sanitise the markets too much, it becomes boring. Every exchange needs a certain element of cowboy-ness (including markets like S&P500 and Nasdaq) to maintain relevance and interest. They way SGX is headed, you might as well list all boring ETFs and kill off the broking industry. When you shrivel the market into mainly blue chips that move, you institutionalise the entire industry. When the speculative counters do not present trading opportunities, investors and punters will just ignore and shy away. Casinos are there on the pretext that you can make supernormal gains, if that is not present, even casinos will close shop. What SGX has been doing for the past 7 years is like a casino which limits your gains, e.g. if you make S$10,000 then your bets are halved, etc... In protecting the investors, you can somehow err on the side of caution. There is little to justify the big salaries at SGX and the trading fees collected by SGX. They way they clamped down on "cowboy-ness" and the proliferation of REITs are just examples of going the "wrong way" unless what they want is to shrink the industry.

REITs Sink

Singapore REITs had the third-worst return in the Asia-Pacific region in the past 12 months as rising bond yields made the securities less attractive, according to data compiled by Bloomberg. The FTSE Straits Times REIT Index tumbled 13 percent in the period, compared with a 5 percent decline for the benchmark Straits Times Index.

Stockbrokers are competing against online trading platforms for business. Retail investors in Singapore are increasingly using websites and apps to trade shares amid growing use of mobile gadgets, according to a report by researcher Investment Trends.

About 51 percent of the 460,000 brokerage clients in the city traded shares online in the 12 months through September compared with 49 percent a year earlier, according to the report.

On top of imposing minimum collateral requirements on investors and reducing the settlement period for stock transactions to two days from three by 2016, the city-state may also set up an independent listing committee and boost enforcement, SGX and MAS announced on Feb. 8.

Orderly, Transparent

The proposals will help in “promoting orderly trading and responsible investing” and “improving the transparency of market intervention measures,” the central bank and exchange said in a statement at the time.

The Securities Association of Singapore can’t comment on how the proposed changes will affect brokerages pending consultation with its members, Melinda Sam, chief executive officer of the organization that represents trading firms, said by phone. The group will submit its position paper by the May 2 deadline, she said.

Some stockbrokers have given up waiting for an industry revival.

“The risk to reward just doesn’t work out,” Chin Chung Hwa, who quit his job as senior vice president of corporate broking at CIMB Securities Singapore Pte. in December. “I left the industry to join private banking because it’s more stable and clients must put money upfront.”

Is A Wine Aerator Necessary

A wine aerator is a small, in-bottle, hand-held pour-through or decanter top device for aerating wine. These devices mix air into the wine as it flows through or over, increasing exposure to oxygen and causing aeration. They offer an alternative to swirling, traditional decanting, and to aldouze (i.e. to wait for wine to breathe). This category emerged in the United States in or before 2007. This timing can be partially linked[citation needed] to the decline of the US economy which resulted in wineries releasing wine early to compensate for sales dips.

The Vinturi brand is the more recognisable one. However, you can get the RM76 Magic Decanter from Ben's Grocers @ Publika.

The Vinturi Deluxe


There are a number of styles of wine aerators and approaches to accomplish aeration. While injection-style hand-held acrylic aerators are currently most common, in-bottle and decanter top aerators are also available. Sieve-style decanter top funnels have long been used for aeration and catching sediment. Aerators are made from food safe-plastic or glass, and decanter top aerators are commonly stainless steel.

Injection-style aerators work by the Venturi effect, an application of Bernoulli's principle: they feature a wide tube that narrows. This effect is widely used in engineering applications, for example to mix air and fuel in carburetors. This method has been noted by wine experts to be too harsh for thinner skinned verietals such as Pinot noir or Gamay.

p/s there are already many tests done on the credibility of wine aerators, the results are not convincing, but to some they work well ... my view is that if you opening up an expensive bottle, DO NOT use the aerator, use the decanter and let nature takes its course .... but for normal wines, you can test it yourself, I did.

The Informal Test

So I gathered my brothers and cousins for a testing of the product, we actually bought 3 aerators but wanted to know if it works, and how many times should you aerate the wine.

d'Arenberg The Laughing Magpie 2009 Shiraz Viognier
Tasted the wine before aeration, it was a bit tart, acidic and needed time to open up. After first aeration, there was not much difference. After the second aeration, the difference was enormous. The tartness was gone and the wine opened up nicely, very satisfying. All participants agreed the difference was highly significant.

It appears to me that a one time aeration is equal to 30 minutes in the decanter. We tried another Australian wine, a cheaper wine, but this time we went through 4 aerations. The wine improved markedly in drinkability by the 3rd aeration but the 4th aeration saw the wine deflate enormously, it went flat, the flavours were no longer jumping to the tastebuds. So, there is a big danger of over aeration. We were all so excited that the thing actually works and made a significant difference.

Key is, drink a bit after each aeration before you aerate again. I think it works well for wines with harsher tannins as the aerator seems to soften them noticeably, for more forward wines it also brings up the aromas faster. Hence it may not work as well for the traditional French reds I think which are subtler. The aerator works better for new world wines that are less multi dimensional. That said, you do not need to use it for whites.





Gérard Jacumin Châteauneuf-du-Pape 2010
from Southern Rhône



Château Haut-Bergey Pessac-Léognan 2008
from Graves

I also tried the aerator with the two French wines above, both needed 3 aerations before opening up a bit more. So there you go, need not wait 2 to 3 hours for the wine to breathe anymore, open, aerate and drink. The aerator is also very mobile, you can take it off the stand and take with you anywhere, it will almost fit any decanter as well, just put aerator on top of decanter before pouring, wallah. RM76, how to go wrong.

Ponderings

Kami no Shizuku - Drops Of God

This has to be one of the best discovery. What started out as a sleeper hit in manga circles was finally adapted into a very good Japanese drama series.



Drops of God (神の雫 Kami no Shizuku?) is a New York Times Best Selling Japanese manga series about wine. It is created and written by Tadashi Agi, a pseudonym employed by creative team of sister and brother Yuko and Shin Kibayashi, with artwork by Shu Okimoto. All the wines that appear in the comic are authentic.

The series was first published in November 2004 in Weekly Morning magazine in Japan, and still runs to date. It is also published in Korea, Hong Kong and Taiwan. Since April 2008, volumes have also been published in France by Glénat. As of December 2007 the series had registered sales of more than 500,000 copies.



A live action television adaptation, also titled Kami no Shizuku, was broadcast by Nippon Television in January 2009. To wine lovers, this is a gift in so many ways. It treats wine as a burden of love. Obviously the creators and writers were huge wine lovers to start with.

The story has it that a top wine critic and writer in Japan died and left his collection worth $20m to his "only" son and a recently adopted godson. However, they will have to guess the six apostles (wines that he regarded as the best ever) and kami no shizuku (the final "drops of god").



The only clues are notes he has written about each wine, how he felt and the images he had while drinking them. Its a little over the top at times but gotta cut them some slack for trying.

This series is also very good for people who are just starting to drink fine wines. Its also highly educational. At the end of each episode, they will have notes on the wine featured and explains what terminologies meant. To be fair, they looked at French wines primarily with a glance at Barolos.



When the manga fever hotted up, the wines featured shot up in value, and again when the series went to air on TV. Its hugely entertaining.

Some of the wines featured are posted here as well. Its a worthy series about wine, it tries to examine wine as depicted in the eyes of sommeliers and critics, and how the common man can also enjoy them without snobbery. It highlights the fact that wine is a lot nicer with company, and you can be as knowledgable with the subject matter or not, in the end its for you to enjoy. 



In the manga series it was the twelve apostles plus one, but they shortened it to six plus one for TV. Keep a lookout for the girl who plays Miyabi Shinohara the sommelier in training, she is so fun to watch. Her name is Naka Riisa. Oh... and note the product placement for Riedel glasses ... obviously they went through a lot of glasses in the series, smart to get a sponsor and Riedel was smart enough to associate themselves with such a classy project.



http://www.dailymotion.com/video/xqax5l_kami-no-shizuku-01_fun

Update - Ukraine

Special Eurasia Group Update – Ukraine

By Ian Bremmer, Eurasia Group

russia is conducting direct military intervention in ukraine, following condemnation and threats of sanction/serious consequence from the united states and europe. we're witnessing the most seismic geopolitical events since 9/11.

a little background from the week. russian president vladimir putin provided safety to now ousted ukrainian president viktor yanukovych. the ukrainian government came together with broadly pro-european sentiment...and with few if any representatives of other viewpoints. the west welcomed the developments and prepared to send an imf mission, which would lift the immediate economic challenge. and then, predictably...the russians changed the conversation.

the west – the us and europe – supported the ukrainian opposition as soon as president yanukovych fled the country. that also effectively breached the accord that had been signed by the european foreign ministers, opposition and president yanukovych (a russian special envoy attended but did not add his name). the immediate american perspective was to take the changed developments on the ground as a win. but a "win" was never on offer in ukraine, where russian interests are dramatically, even exponentially, greater than those of the americans or europeans. for its part, the new ukrainian government lost no time in antagonizing the russians – dissolving the ukrainian special forces, declaring the former president a criminal, and removing russian as a second official language. the immediate russian response was military exercises and work to keep crimea. president vladimir putin kept mum on any details.

let's focus on crimea for a moment. it's majority ethnic russian, and ukrainians living there are overwhelmingly russian speaking (there's a significant minority population of muslim crimean tatars, formerly forcibly resettled under stalin – relevant from a humanitarian perspective, but they'll have no impact on the practical political outcome). crimea is a firmly russian oriented territory. crimea has a russian military base (with a long term lease agreement) and strong, well organized russian and cossack groups – which they've supplemented with significant numbers of additional troops, as well as military ships sent to the area. russia has said they will respect ukrainian territorial integrity...and i'm sure they'll have an interpretation of their action which does precisely that. 

moscow will argue that the ouster of president yanukovych was illegal, that he's calling for russian assistance, that the new government wasn&# 39;t legally formed, and that citizens of crimea – governed by an illegal government – are requesting russia's help and protection. all of which is technically true. to be sure, there are plenty of things the russians have already done that involve a breach, including clear and surely provable, given sufficient investigation, direct russian involvement in taking over the parliament and two airports in crimea. but that's not the issue. it's just that if you want to argue over the finer points, the west doesn't have much of a legal case here and couldn't enforce one if it did.

and the finer points aren't what we're going to be arguing about for some time. president obama's response was to strongly condemn reported russian moves, and to imply it was an invasion of sovereignty...promising unspecified consequences to russia should they breach ukrainian sovereignty. if that was meant to warn the russians, who have vastly greater stakes in ukraine (and particularly crimea) than the americans and the europeans, it was a serious miscalculation, as putin already controlled crimea, it was only a question of how quickly and clearly he wanted to formalize that fact. there's literally zero chance of american military response, with the pentagon quickly clarifying that it had no contingencies for dealing with moscow on the issue – that's surely not true, they have contingencies for everything. but secretary of defense chuck hagel just wanted to ensure nobody thought the president meant that all options were on the table. inste ad, we're seeing discussions of president obama not attending the g8 summit in sochi and targeted sanctions against russia.

putin has since acted swiftly, requesting a vote from the russian upper house to approve military intervention in ukraine. it was approved, unanimously, within hours. it's a near-certainty that the russians now persist in direct intervention. the remaining related question is whether russian intervention is limited to crimea – putin's request included defense of russia's military base in sevastopol (on the crimean peninsula) and to defend the rights of ethnic russians in ukraine...which extends far beyond crimea. putin's words may have been intended to deter the west, or he may intend to go into eastern ukraine, at least securing military assets there. given that pro-russian demonstrations were hastily organized earlier in the day in three major southeast ukrainian cities, it seems possible the russians are intending a broader incursion. if that happens, we're in an extremely escalatory environment. if it doesn't, it's still possible (though very difficult) that the west could come in financially and stabilize the kyiv government.
* * *
before we get into implications, it's worth taking a step back, as we've seen this before. in 2008, turmoil developed in georgia under nationalist president mikheil saakashvili, a charismatic figure, fluent english speaker, and husband to a european (from the netherlands). he made it very clear he wanted to join nato and the european union (the latter being a pretty fantastic claim). the russian government was doing its best to make georgia's president miserable – cutting off energy and economic ties and directly supporting restive russian-speaking republics within georgia. for his part, saakashvili delighted in directly antagonizing putin – showing up late for a kremlin meeting (while he was busy swimming), insulting him personally, etc.

saakashvili was a favorite of the west, the us congress particularly feted him. the messages from the united states were positive, making it sound like america had his back. internally, there was a strong debate – vice president dick cheney led the calls to free himself from russia's grip as fast and as loudly as possible, secretary of state condoleezza rice thought saakashvili unpredictable and dangerous, and wanted to urge him to back off (as did former secretary colin powell, who lent his view to the white house as well). the cheney view prevailed, georgian president already had a habit of hearing what he wanted to out of mixed messages, and he proceeded. on 8 august, the russian tanks rolled into georgia and then the united states was left with a conundrum –  what to do to defend america's "ally" georgia.

as it turned out, nothing. national security advisor steve hadley chaired a private meeting with president bush and all relevant advisors, most of whom said the united states had to take action. bush was sympathetic. hadley stopped the meeting and asked if anyone was personally prepared to commit military forces to what would be direct confrontation with russia. he went around the room individually and asked if there was a commitment – which would be publicly required of the group afterwards (and uniformly) if they were to recommend that the president take action. there was not – not a single one. and then the meeting quickly moved to how to position diplomacy, since there wasn't any action to take.

that's precisely where we are on ukraine – but with much higher stakes (and with a united states in a generally weaker diplomatic position), since ukraine is more important economically and geopolitically (and to europe specifically on both).
* * *
the good news is that russia doesn't matter as much as it used to on the global stage. indeed, a big part of the problem is that russia is a declining power, and the west's response on ukraine was to make the west's perception of that reality abundantly clear to putin. which, in putin's mind, required a decisive response. but this has the potential to undermine american relationships more broadly. to say the us-russia relationship is broken presently is an understatement – the upper house also voted to recall the russian ambassador to washington (america's ambassador to moscow had just this past week ended his term – the decision was unrelated to the crisis).

what will be much more interesting is 1) the significance of the west's direct response; 2) whether the russians will cause trouble on a broader array of fronts for the west; and 3) whether a strongly-intentioned russia can shift the geopolitical balance against the united states.
taking each of these in order.

1) the west's direct response. we won't see much, although there will certainly be some very significant finger-pointing. president obama will cancel his trip to sochi for the upcoming g-8 summit and it's possible that enough of the other leaders will join him that the meeting is cancelled. it's conceivable the g7 nations would vote to remove russia from the club. the us would also suspend talks to improve commercial ties with the united states. it's possible we see an emergency united nations security council session to denounce the intervention – which the russians veto (very interesting to see if the chinese join them, and who abstains...). hard to see significant european powers actually breaking relations with russia at this point, but an action-reaction cycle could spiral. also, nato will have to fashion some response, possibly by sending ships into the black sea. shots won't be fired, but markets will get fired up.

2) international complications from russia. this will significantly complicate all areas of us-russian ties.

russia doesn't want an iranian nuclear weapon, but they'll be somewhat less cooperative with the americans and europeans around iranian negotiations...possibly making them more likely to offer a "third way" down the road that undermines the american deal. on syria, an intransigent russia will become very intransigent, making it more difficult to implement the chemical weapons agreement and providing greater direct financial and military support for bashar assad's regime.

on energy issues, a russian invasion of eastern ukraine would put in play the integrity of major pipelines. moscow and kyiv would share strong incentives to keep gas and oil flowing, but in the worst case we could see disruptions. ukraine has gas reserves for a while, but then the situation could become dire. russia could divert some european-bound gas through the nord stream line, but volume to europe would drop. this is all in extremis, but out there.

3) geopolitical shift. russia will see its key opportunity as closing ranks more tightly with china. while we may see symbolic coordination from beijing, particularly if there's a security council vote (where the chinese are reasonably likely to vote with the russians), the chinese are trying hard to maintain a balanced relationship with the united states...and accordingly won't directly support russian actions that could undermine that relationship. leaving aside china, russia's ability to get other third party states on board with their ukrainian engagement is largely limited to the "near abroad" – armenia, belarus, tajikistan –  which is not a group the west is particularly concerned with.

but it is, more broadly, a significant hit to american foreign policy credibility. coming only days after secretary of state kerry took strong exception to "asinine", "isolationist" views in congress that acted as if the united states was a "poor country," a direct admonition by the united states and its key allies is willfully and immediately ignored by the russian president. that will send a message of weakness and bring concerns about american commitment to allies around the world. g-zero indeed.

Asset Class Returns As At 28 February 2014

February saw a lot of movement of funds. Looking at that month alone, there had been a large mobilisation of funds from those on the sidelines. Even commodities surged after a sombre 2013. This was the surge that could very well start the deluge of idle funds making them to go to work. Unfortunately the Ukraine situation kind of put a spanner into the works. The key now is to see if that is enough to derail the funds to flee completely and stay sidelined again. My view is that the incursions into Crimea and Ukraine by Russia will result in trade sanctions rather than an outright war by NATO/US against Russia. Obama will be loathed to send in any troops and certainly not against Russia. Once the sanctions are announced I believe some stability will be seen in the markets.

British & American English

Still deciphering between American and British English?? .... nowadays, it does not matter much, heck American English will prevail owing to the media and modern culture being largely American. We all know what the words mean, so fergedaboudit, use both without snobbery or rolling of the eyes, please.